The Curse of Aid? Re-Examining the Impact of Aid on Regime Change

Abstract

This paper examines whether foreign aid, like oil revenue, decreases the likelihood of regime transitions. It tests the hypothesis that with respect to aid, it is donor intent rather than the money itself that determines whether or not aid is associated with a decreased likelihood of regime change. By examining the impact of aid on the likelihood of regime transitions in both the Cold War and post-Cold War period, support is found for the central role of donor intent. During the Cold War, when Western donors gave aid in order to prop up friendly regimes, the negative effect of aid on the likelihood of a regime transition surpassed that of revenue from state-owned enterprises. In the post-Cold War period, when donors have lost their desire to use aid to prop up regimes, there is no significant association between aid receipts and the likelihood of regime change. This suggests that as long as donor intentions are benign, it is possible to give aid to authoritarian regimes without decreasing the chances of a democratic transition.